STATE FOR EAP/MLS AND EB
COMMERCE FOR EAP/MAC/OKSA
TREASURY FOR OASIA
STATE PASS TO USTR FOR WEISEL
STATE PASS TO FEDERAL RESERVE SAN FRANCISCO FOR DAN FINEMAN
STATE PASS FEDERAL RESERVE NEW YORK FOR MATT HILDEBRANDT

1. (SBU) On June 11, Thailand's Asset Examination Committee (AEC),
which has been investigating corruption cases from the previous
government, ordered that the assets of former PM Thaksin and his
wife, sister, children and brother-in-law be frozen pending a court
ruling on alleged corruption. The order was based on 11 counts of
"acts of dishonesty and abuses of power to accumulate unusual
wealth" with total damage to the state calculated to total Bt148.2
billion (US$4.5 billion) by the AEC. The AEC said it would freeze 21
bank accounts associated with the sale of Shin Corp to Temasek
containing assets worth Bt52.9 billion (US$1.52 billion). In
addition, all domestic accounts held by Thaksin and his wife would
also be frozen once identified by the nation's financial
institutions. Banking industry contacts tell us that over the past
week the AEC has been calling banks asking them whether Thaksin or
his family held any accounts at their institutions. At least one
foreign bank was asked whether Thaksin owned any accounts at its
Singapore branch. The bank refused to provide this information
without a legal order from the Singapore authorities.

2. (SBU) Thaksin netted Bt73.3 billion from the sale of his company,
Shin Corp, to Temasek. This entire amount was brought onshore; a
necessary condition in order to achieve a tax-free transaction (by
selling the shares through the Stock Exchange of Thailand). The AEC
found only Bt52.9 billion remaining in Thai accounts leaving Bt20.1
billion (US$619 million) unaccounted for. The Bank of Thailand (BoT)
has reportedly instructed all banks in Thailand to trace all
transactions relating to these accounts. BoT officials, including
then-Governor Pridiyathorn, told us shortly after the Shin sale that
they had instructed Thai banks not to make any overseas transfers
from Thaksin accounts without prior BoT approval. Pridiyathorn told
us that these accounts would be carefully, if quietly, monitored by
his institution. Other than a widely-publicized transfer of Bt400
million to allow Thaksin to buy an additional property in London,
there have been no transfers abroad from the subject accounts
according to current BoT Governor Tarisa. We have been unable to
learn whether Thai officials were aware that the bank accounts were
being rapidly depleted or whether account activity is what prompted
the decision to freeze the assets at this point.

3. (SBU) The question of "why freeze Thaksin's assets at this point
in time" is a current favorite pastime of Thai analysts. We have
heard several explanations. Many argue that it is "punishment" for
Thaksin purportedly having financed anti-junta demonstrations last
weekend and to limit his resources so that future demonstrations
could not be similarly funded. (Comment: Thaksin is presumed to have
been financing anti-junta activity since at least March, but the
relative size of the most recent activity is notable. End Comment.)
Others tell us that the AEC was always planning to take this action
and were simply waiting to have their investigations into Thaksin
corruption far enough along to justify the asset freeze order. The
most imaginative have said that Thaksin's decision to purchase the
Manchester City Premier English League soccer club was of concern to
junta leaders (because Thais might be induced to support "Thaksin's
team" when watching the popular broadcasts of English soccer) and
the goal is to prevent this transaction from being completed. One
analyst argued that the AEC has not sought cooperation from other
governments to freeze Thaksin's overseas accounts because, with his
Thai assets frozen, Thaksin will now be forced to utilize his
overseas assets to buy Manchester City and this will "expose" where
he keeps his overseas money.

4. (SBU) Whatever the reason behind the AEC action, the failure of
the AEC to seek international cooperation for attachment of Thaksin
family assets outside of Thailand is a surprise to most analysts
here. The Bank of Thailand tells us that the AEC did not request
such action and they will only act if so-requested. The AEC has only
said that it is acting "to retain the assets involved (in the Shin
transaction). It is not a punishment. It is not a final judgment."
Nevertheless, they are demanding documents from Thaksin's UBS
account in Singapore "but have no access to it." The Singapore
Embassy here tells us that they have received no requests from the
RTG to help in this case. Thaksin has 60 days to unfreeze his assets
by verifying he earned these assets through legal means.

5. (SBU) Comment: There was considerable expectation that Thaksin's
assets would be quickly seized when the coup leaders first took
power last September. But coup leaders argued that they would abide
by rule of law and due process and take such action only if the
circumstances and investigations warranted. It has now been some
weeks since the AEC brought proceedings against the Thaksin children
for tax evasion related to the Shin Corp sale and Thaksin's wife for
"dishonestly" purchasing land from the Bank of Thailand; yet assets
were frozen only on June 11. Some people involved in Thai financial
markets have long argued that the RTG would never freeze Thaksin
assets because Thaksin might then be compelled to use his ultimate
weapon, i.e. evidence of payments he made to the Crown Prince. With
his party dissolved, his key allies banned from politics for five
years, legal cases pending against his wife and children, and now
his assets under threat, Thaksin may feel compelled to utilize any
measures available to counterattack. He has very recently threatened
to return to Thailand to defend himself-his first return volley in
what may be a new form of his game of chicken with the CNS.

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